Get set, go! After giving 700% return in 5 yrs, this smallcap is ready for a fresh run

NEW DELHI: The recent uneven performance of Granules India has not been in line with the strong show that the drugmaker has put up over last five financial years, when this stock surged 700 per cent.

The company’s top line growth in recent quarters has been patchy, even though it has reported eight times growth in sales and 18 times growth in profit in 10 financial years to FY17.

Analysts expect the company to deliver a healthier second half, on recovery to 10 per cent sales growth each in the first two quarters of the current financial year.


The recent drop in profit was temporary, they say, adding that the firm may report profit growth in excess of 20 per cent over FY17-20, led by strong sales, ANDA approvals and capacity expansion in core business.



The company was recently in news when its Omnichem JV received the establishment inspection report (EIR) from USFDA for its Vizag facility. The company believes FY19 would be a good year amid expanded API and PFI capacities and launch of new products that are in the pipeline.

The company has two ANDAs pending with USFDA from the Virginia, US, facility. These filings include Colcrys, whose latest patent lasts till 2029.

The other product used for labor pain management. “The company is confident of getting approval for this product, which has a market size of $60 million, and expects it to be a meaningful opportunity, where gross margin could be more than 90 per cent,” Equirus Securities said in a note.

The brokerage expects the company to pass on the rise in raw material cost to customers and commercialise expanded API and PFI capacities, besides launching gGlucophage XR.

The ANDA launch from the company’s Virginia facility is likely to see low competition. But there could be a slower ramp-up at Omnichem JV and dilution owing to QIP, Equirus said.

Centrum Broking expects the company to deliver superior performance due to a change in product mix, additional capacities, margin improvement and new product launches. That said, a slowdown in the global market and regulatory risks for its manufacturing facilities pose risks, the brokerage said. It has a target of Rs 150 on the stock.

The stock has risen 700 per cent in last five years. Data available with corporate database Capitaline showed the company has doubled profit in last five financial years. During these same years, profit grew five times, data showed.

The second half of FY18 will mark the beginning of strong top line growth for Granules India, on the back of expected ANDA approvals for the US market and core business capacity expansion kicking in.

“While the full impact of these factors likely to take some time to be visible, we expect FY19 to be a strong growth year. Overall, we expect 17 per cent revenue CAGR, 21 per cent Ebitda CAGR and 24 per cent PAT CAGR over FY17-20E,” brokerage HDFC Securities said in a note. It has a target of Rs 170 on the stock.

The stock traded at Rs 124 in Friday’s trade.